Has Indonesia just promised closer security cooperation with the United States in return for tariff concessions? There are strong reasons to think so—and, if it has, it has put itself in awkward spot, one that breaks its long-standing commitment to non-alignment. Also, China will probably retaliate.                                                                   

US President Donald Trump said on 15 July that a deal with Indonesia on tariffs had been agreed to. As part of this, the US will reduce tariffs on Indonesian goods from a threatened 32 percent to 19 percent. Details are unavailable, but we know that the United States has been tying tariff relief to Indonesia’s strategic policy in the South China Sea.

Before the agreement was concluded, Indonesian officials privately shared concerns about this with us. Washington was linking tariffs with geostrategic issues, and South China Sea disputes were the focus, they said.

More evidence of this appeared on 11 July when news outlet IDN Times quoted from Jakarta’s response to the latest, 7 July trade proposals from Trump, the ones that have now led to a deal. The cited letter, seeking to avoid heavy tariffs, included Indonesian offers of greater security cooperation—strongly implying that the US had connected those issues to trade.

‘The government is committed to strengthening strategic cooperation with the United States in the maritime and military sectors, as well as increasing border surveillance in sensitive areas such as the South China Sea,’ according to the document, the authorship of which was not reported.

Indonesia also offered ‘closer cooperation with the US in economic and security matters through maritime policy, but not including accelerated ratification of the Indonesia–Vietnam Exclusive Economic Zone (EEZ) border. This [offer of closer economic and security cooperation] includes only export controls, increased military collaboration, the use of secure communications technology and strengthening border surveillance and control, particularly in the South China Sea.’

Now the US has presumably accepted these offers.

In dealing with many other countries on trade, the Trump administration focuses only on economics. But in this case, the US is evidently trying to force Indonesia’s South China Sea policy to align with its own interests and to undermine China’s regional influence.

The document cited by IDN Times reveals that Washington sought two Indonesian commitments on the South China Sea in the trade agreement. First, it pushed Jakarta towards closer security cooperation, especially in the disputed area of the South China Sea. This closer cooperation presumably would include military exercises and joint patrols.

Second, the US wanted Indonesia to expedite ratification of the Indonesia–Vietnam Exclusive Economic Zone agreement. This is important because the maritime delimitation agreement signed by Indonesia and Vietnam overlaps with the nine-dash line that delineates China’s (ambiguous) claim to the South China Sea. Ratification of the agreement would reaffirm that Indonesia recognised no Chinese claim. It might also encourage Indonesia to back away from a November plan for joint development of the disputed waters in cooperation with China.

Although Prabowo has said Indonesia is committed to ratifying the treaty, the ratification process in the Indonesian parliament has been stalled for more than a year.

What we are seeing is the Trump administration’s readiness to use economic pressure to steer Indonesia’s foreign policy decisions—specifically, using Indonesia to challenge China’s position in the South China Sea.

Yet China has also used economic pressure to bend Indonesian policy. The joint development plan has been an example of that, since an Indonesian joint statement with China recognising an overlapping claim would imply Indonesian recognition of Chinese rights there. Notably, the lure of a US$10 billion Chinese investment commitment to Indonesia accompanied the agreement.

And Beijing has threatened retaliation against countries that make trade deals with the US at the expense of Chinese interests. A Chinese official said, ‘China firmly opposes any party reaching a deal at the expense of China’s interests.’ … ‘If this happens, China will never accept it and will resolutely take countermeasures in a reciprocal manner.’

Jakarta is left in a difficult situation as it tries to walk a line of non-alignment. Although its EEZ overlaps with the nine-dash line, it has traditionally presented itself as a non-claimant in the South China Sea. Yet it has also refused to recognise China’s sweeping claims.

It has declined to back the US in resisting China’s influence in East Asia and at the same time has not advocated for China. It has less reason now than a few years ago to provoke China, because fewer Chinese government ships and fishing vessels are now intruding into Indonesian waters around Natuna Island.

Indonesian agreement to increased maritime security cooperation with the US would alarm China, which has long sought to exclude extra-regional powers from South China Sea disputes. Joint Indonesia-US activity in the South China Sea might further delay protracted attempts at negotiating a code of conduct to regulate activities in the disputed area between China and the Association of Southeast Asian Nations.

Faced with economic pressure from Washington and the risk of reprisals from Beijing, Jakarta finds itself cornered.